Q: Do I qualify for the $8,000 credit for new home buyers if I don’t plan to live in the house until I retire? I plan to rent the home for four years until I retire. I qualify based on the other restrictions but was wondering if the residency is an issue.
A: Sorry, but to qualify for the first time home buyer tax credit of $8,000 – or even the repeat home buyer tax credit of $6,500 – you must make the home you’re purchasing your primary residence. Not only that, but you must live in that home as your primary residence for at least three years following the purchase of the home.
Your purchase of a home that you’d rent out for four years would be considered an investment purchase. The purpose of the tax credit is to encourage first time home buyers to buy homes and to encourage long time home owners – people that have owned and lived in their homes for at least five years – the opportunity to move up to a new home.
Your situation unfortunately means you do not qualify for either tax credit.
But you would be entitled to other tax benefits available to real estate investors who own an investment property. You will be able to deduct your expenses of owning the property and depreciate the home. When you take depreciation on a piece of property, you claim for accounting and tax purposes that you lose some of the value of that property yearly. As you “lose” value, you get to deduct that loss from your taxes. While you might be limited in the amount you can take as a loss on your income taxes, you will offset any income you get from the rent you receive by the expenses you incur and the depreciation you take in owning the home.
You can use tax preparation software to help navigate the waters of owning an investment property. Or, you might want to consult with an accountant before you purchase the property and then before you file your first tax return.
The IRS has specific rules regarding the tax credits. You can find out more about them by going to IRS.gov and searching “$8,000 tax credit.”
Read more about the home buyer tax credit:
8000 First Time Home Buyer Tax Credit Qualifications: Do You Qualify?
$8000 First Time Home Buyer Tax Credit Qualifications Issues
what is i know someone who took the money and is renting what do i do?